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Baker Hughes Deploys New Products in GOM in 1Q 2014

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   |    Thursday,April 17,2014

Baker Hughes Incorporated (BHI) announced today results for the first quarter of 2014 are as follows:

Martin Craighead, Baker Hughes Chairman and Chief Executive Officer, said: "This quarter we delivered an increase in profit margins and earnings.

Our performance is the result of actions to optimize operational efficiency, along with increasing demand for several innovative new product offerings.

The benefit of these actions can be seen in our North America operations this quarter. On an adjusted basis, this segment delivered 200 basis points of margin improvement, despite a drop in well count caused by poor weather in the Rockies and northeast United States. Outside of North America, our operations experienced the typical seasonal decline in product sales to start the year, along with severe weather conditions in the North Sea and Russia, leading to a 5% sequential drop in revenue for our international business. However, resumption of our activity in Iraq, along with increased demand for high technology services in Africa, the Middle East, and Asia Pacific, led to a 6% sequential increase in international adjusted operating profit.

Compared to the same quarter last year, our adjusted earnings per share have increased 29%. Based on this positive performance, and our favorable outlook for our industry, we repurchased $200 million of our shares during the first quarter.

The demand for both innovative and integrated products and services has never been greater. We are continuing to redefine the technical limits for our customers in drilling efficiencies, production optimization, and ultimate recovery. These factors, along with our continued focus on operating efficiency, are driving profitable growth in the company, leading to an increase in our shareholders' returns."

Capital expenditures were $439 million, depreciation and amortization expense was $437 million, and dividend payments were $66 million in the first quarter of 2014.

Baker Hughes First Quarter 2014 Operational Highlights

In Brazil, Baker Hughes drilled a highly complex deepwater well through the integration of multiple product lines. Baker Hughes deployed advanced drilling services, high technology logging-while-drilling (LWD) services, remote monitoring, and the DKD™ dynamic kill drilling fluid system. Utilizing these different technologies, Baker Hughes successfully drilled a horizontal well, not far below the ocean floor, where drilling conditions are unstable. The project was completed on target, ahead of schedule, and under the customer's budget.

In Nigeria, Baker Hughes successfully deployed a series of latest-generation LWD technologies, and advanced wireline services on several projects. This included FASTrak™ LWD fluid analysis sampling and testing service, which is the industry-leading technology providing our customers with downhole reservoir analysis and high quality fluid samples during the drilling process. Additionally, Baker Hughes completed the first "walkaway" downhole seismic service in Nigeria, which provided the customer with critical geophysical data used in reservoir mapping.

Baker Hughes continues to deliver strong performance on wells with extreme downhole conditions in the Gulf of Mexico. During the quarter, wireline-conveyed cased hole logging and mechanical services were deployed on an ultradeep gas well with temperatures approaching 500°F (260°C) and 30,000 psi (2,068 bar). To ensure the operation would be performed safely and reliably, several products were specifically engineered to operate in this environment. This included the new Nautilus Ultra™ Reservoir Performance Monitor™, used to quantify saturation levels through casing. Additionally, a new HP/HT hydrostatic setting tool was deployed for the first time. This device can be used in place of traditional ballistic setting tools, which are prone to failure at these temperatures. Also during the quarter, ultra-HP/HT, tubing-conveyed perforating services were delivered on a well with pressures up to 35,000 psi (2,413 bar).

Baker Hughes installed the deepest subsea boosting system ever for a customer in the Gulf of Mexico. A significant challenge for the project was the design of a system for deployment in a water depth of 8,200 ft (2500 m). The solution required multiple high horsepower electrical submersible pump (ESP) systems combined within a horizontal booster cartridge. This configuration provided the production rates to make this project economical with the advantage of having a system that can be serviced with a light-well intervention vessel.

Baker Hughes was awarded its largest ever artificial lift contract for the Middle East. The workscope includes the supply, maintenance, and surveillance of 400 ESP systems over a five-year term.

Baker Hughes secured a significant FLEXPump™ order in Russia during the quarter. In addition to effective operation in a wide variety of flow ranges, recent testing performed by the customer showed that FLEXPump consumed 20% less power than a competing ESP system.

The FracPoint™ multistage fracturing system continues to gain momentum in international markets and was deployed for the first time in North Africa. A major operator chose the FracPoint system to recomplete a tight gas well, resulting in a significant increase in production and showing potential for further deployment in the area.

Baker Hughes was awarded the provision of drill bits, completions systems, and wireline services for a tight gas development project in the Middle East over multiple years. The award was based upon the Company's ability to quickly develop fit-for-purpose well construction and reservoir evaluation systems. The workscope includes liner hangers, Kymera™ hybrid drill bits, Reservoir Performance Monitor service, and the SurePerf™ rapid select-fire perforating system.

The process and pipeline services business secured a multiyear contract to provide shutdown services relating to assets in the North West Shelf of Australia. The contract is to provide a range of process services to efficiently and effectively ensure safe production system shutdown and ensure full system integrity prior to facility start-up.